Will Honda Fit Hybrid Start a Price War?

Reuters speculates this morning that a hybrid price war is about to break out between Honda and Toyota. The initial skirmish, the bureau says, will come in Japan. But if a discount battle were to start, it's hard to imagine it being contained in the Japanese domestic market. Then again, we've heard all of this before.

Japan's Nekkei Business Daily reports that an upcoming hybrid edition of the Honda Fit will be the trigger. Honda has announced pricing for the Fit hybrid. The new car will begin at 1.5 million yen (about $16,570) when it goes on sale this fall. That undercuts the Toyota Prius significantly -- in Japan, Reuters reports, Prius prices start at 2.1 million yen ($23,500).

But then, analysts predicted the same price war when Honda first launched the Insight hybrid. Coming in at 1.9 million yet ($21,300), the Insight is currently the least-expensive hybrid car on the market in Japan. Many had predicted that the Insight's appearance on U.S. shores would lead Toyota to introduce a stripped-down Prius for under $20k, but despite early chatter out of Toyota, the cheap Prius I never showed up in American showrooms.

Prius prices stayed high for many years because Toyota needed to recoup research and development costs for the first largely successful hybrid, but analysts tell Reuters that issue is no longer relevant, for either Toyota or Honda. Kazaka Securities analystYoshihiko Tabei told Reuters "Toyota has finally begun enjoying profits on the Prius and Honda is barely making profits on the Insight." Lowering prices wouldn't be easy, but it's at least realistic for the first time.

In the meantime, we're just hoping for some news about the Fit hybrid on our own shores. According to Reuters, it will combine the practical body of the Fit with the surprisingly zippy powertrain of the Insight. If that reaches U.S. showrooms with a low pricetag, Honda may have a hit on its hands.